Audit Report on the Oversight and Monitoring of Mental Hygiene State Funds Administered by the Department of Health and Mental Hygiene

The Department of Health and Mental Hygiene (DOHMH) protects and promotes the health and mental well-being of all New Yorkers. State funding for DOHMH’s mental hygiene services is outlined in the State Aid Letters sent to DOHMH on an annual basis by various State Agencies, which outline the appropriation for each funding code. On a quarterly basis, DOHMH receives advance payments from the State based on the dollar amounts stipulated in the letters. At the end of the year, unused funds are offset against future spending.

During Fiscal Year 2010, DOHMH had 341 contracts with 219 providers to offer mental hygiene services to over 700 program units. During this period, DOHMH received $205.8 million in advanced State funding for mental hygiene services, of which $189.9 million was allocated directly to these programs. The objective of this audit was to determine whether DOHMH has adequate oversight to maximize the use of State funds for mental hygiene services.

Audit Findings and Conclusions

Our review of DOHMH’s oversight of the utilization of State funds revealed that it needs to improve its monitoring of State funds earmarked for mental hygiene services. Specifically, DOHMH did not develop adequate strategies to maximize the use of the State funds and ensure that all funds made available to it by the State were spent. As a result, during Fiscal Year 2010, DOHMH did not distribute $10.4 million out of $189.9 million in State funds (5.5 percent). The unused funds remain in the advanced revenue source account to offset against future spending, resulting in an overall reduction in State funding provided.

DOHMH does not have an established strategic plan in place to reallocate unspent funds from one program to other programs (within the same funding source) that have higher demand for services or a greater capacity to serve additional clients. As a result, there is an increased risk that individuals who are eligible for DOHMH’s mental hygiene services may not always be receiving those services. In addition, DOHMH does not perform any trend analyses to identify at an early stage of the operating period those contracts whose funds may not be fully utilized. The identification of such tendencies may serve as an indicator that DOHMH officials can work with the providers to deal with operating issues and develop strategies in time to maximize the use of the State funds.

Audit Recommendations

To address these issues, we make the following three recommendations. DOHMH should:

• Develop strategies for the reallocation of unspent funds among programs within the same funding source.
• Continue working with the State to obtain greater flexibility in using State funds.
• Perform, on a quarterly basis, trend analyses of the spending of State funds and work with providers on a continuous basis to address issues that may negatively affect the ability to utilize State funds.

Agency Response

DOHMH officials agreed to implement two of the three recommendations in the report and disagreed with our recommendation to develop strategies for the reallocation of unspent funds among programs within the same funding source, asserting that there are State restrictions that prohibit at least some such reallocation. DOHMH officials, however, provided no State regulations or guidelines to support their assertions, stating that they had nothing in writing. Accordingly, we see no reason to alter our findings.